Trusting In House Car Financing: 4 Car Dealer Financing Benefits

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Automotive Editor

Justin Cupler has specialized as an automotive writer since 2009, and has seen himself published in multiple websites and online magazines. In addition to contributing to CarsDirect, Justin also works as editor in chief for a large performance car online publication. His specialty lays in the high-performance realm, but has a deep love and understanding for all things automotive. Prior to being an automotive writer, he was an automotive technician and manager for six years, but spent the majority of his younger life tinkering with classic muscle cars.

Learn about the 4 main benefits of in house car financing, and how to reduce any risks involved.

In-house car financing refers to a direct-from-the-dealer auto loan, which is often informally called a buy-here-pay-here loan. Most buyers get their auto loans from the lending wing of an automaker (e.g. Toyota Financial Services), from a bank, or from a credit union—but an in-house loan may be the only option for buyers with a deep subprime credit score.

Because in-house financing often involves some risk on the side of the dealer, these sorts of loans almost always result in higher interest rates than these other options. Before signing on for such a loan, there are several things you should be aware of.

What Is In House Financing? In-house financing exists as a tool for dealerships to sell more cars to more people. Dealerships that offer such services realize that there is a large contingent of potential buyers who are unable to purchase a car through traditional means, often due to poor credit.

These dealers are willing to make high-interest loans to these higher-risk consumers because all the dealership is risking are the costs associated with repossessing the collateral (the vehicle) should the buyer default. If the customer pays off the loan, then the dealership has made a handsome profit in interest alone; if someone defaults on the loan, they can simply repossess the vehicle and sell it again. Some of the less-ethical dealerships out there may try to convince customers to purchase cars that are beyond their means simply to make a few bucks then repossess.

How to Protect Yourself While you must make sure the payment for an in-house loan fits your budget, most experts recommend negotiating based on the purchase price instead of the payment. This helps you avoid the old trick of the dealer meeting your monthly payment criteria by extending the loan term so that they can collect even more interest from you.

Remember, there are many companies that specialize in providing auto loans to people who have credit trouble. While these companies have some potentially negative characteristics of their own—large down payments and high interest rates—you may be able to get a better deal from them. As always, it is best to research all your options before making a decision this important.

The Advantages of In-House Financing Despite the potential for negative financial consequences, purchasing a vehicle with an in-house loan can be a positive experience. For one, this type of financing can generally be trusted as long as you pay close attention to what you are signing. Additionally, this type of financing can get you into the car you need when reasonable alternatives do not exist.

On top of giving you the ability to get the car you need, this type of purchase can go a long way toward repairing your credit—be sure the dealership reports responsible repayment to the three major credit bureaus. Additionally, if you make your payments when they are due for a reasonable period of time, the dealership may allow you to refinance and reduce your rate.

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Justin Cupler has specialized as an automotive writer since 2009, and has seen himself published in multiple websites and online magazines. In addition to contributing to CarsDirect, Justin also works as editor in chief for a large performance car online publication. His specialty lays in the high-performance realm, but has a deep love and understanding for all things automotive. Prior to being an automotive writer, he was an automotive technician and manager for six years, but spent the majority of his younger life tinkering with classic muscle cars.

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